How the ADE Acquisition Scoring Model Works

ADE does not calculate a single intrinsic value or tell a buyer what to pay. It organizes the decision: whether the current deal appears financeable, transferable, evidence-backed, durable, and aligned with the buyer's operating plan.

The acquisition score is deliberately directional. It helps compare strengths, watch items, and hard risks, but the recommendation can still be capped or changed when financing, evidence, execution risk, or diligence gaps make a clean proceed unsafe.

The Acquisition Profile Score is a 100-point first-pass profile of the deal as presented. ADE groups the review into five public categories that mirror how a buyer would pressure-test a small business acquisition before LOI.

ADE does not publish the exact weights, internal scoring adjustments, or calibration thresholds behind these categories. Publishing those details would make the model easier to game and less useful as a buyer discipline layer.

A higher score does not automatically mean Proceed, and a lower score does not explain every Reject. The score describes the profile; the recommendation applies decision rules to the current fact pattern.

That distinction matters when the visible score and the deal outcome point in different directions. A deal can score reasonably well but still be capped at caution because the buyer has not proven the operator plan, evidence confidence is low, earnings durability is weak, or the financing case is too tight.

Some risks are not just mild deductions. ADE treats severe issues as hard risks that can force a rejection or prevent a clean Proceed even when other parts of the deal look attractive.

Examples include unsupportable price relative to the tested lens, extreme customer concentration, critical owner dependence with weak transition readiness, weak cash-flow quality, or a capital structure that does not support the debt burden under the selected assumptions.

ADE separates financeability from valuation. For Main Street and SBA-style deals, the supportability view focuses on lender-adjusted cash flow, recurring reserves, buyer compensation, annual debt service, and DSCR. Missing recurring reserve inputs are treated as missing information, not as automatic zeroes.

For larger deals, the financeability lens shifts toward capital stack supportability, senior debt capacity, total debt service, sponsor-equity need, working-capital peg exposure, and institutional diligence readiness.

ADE does not force every acquisition into the same SBA screen. The analysis changes when the deal looks like a Main Street / SBA acquisition, a lower middle market opportunity, or a middle market transaction.

ADE separates two confidence questions. Analysis Confidence asks whether the model has enough structured inputs to reason through the deal. Evidence Confidence asks whether the source material behind those inputs is strong enough to trust.

Those labels can diverge. A fully documented Reject can have High confidence because the evidence supports the negative conclusion. An attractive but unsupported manual entry can have Low Evidence Confidence even when the numerical analysis looks complete.

Score Completeness is a separate view of how much of the scoring input set has been confirmed. It protects against treating default unknowns like verified facts.

Low completeness does not always mean the deal is bad. It means the buyer should understand how much of the score depends on blanks, estimates, or unconfirmed assumptions before relying on the output.

Financeable does not mean executable. ADE evaluates whether the buyer has a credible post-close operator plan, whether the seller remains too central, and whether the buyer is effectively buying a job that only works with hands-on execution.

Post-Close Execution Risk can cap a clean Proceed when the business may work on paper but the operating plan after closing is not proven.

ADE reviews whether the latest earnings basis is repeatable and whether the structure still works under more conservative historical or down-year cases. A current case can look supportable while a median or weaker year exposes a fragile debt-service picture.

Durability warnings are not valuation opinions. They are prompts to verify recurring revenue, customer retention, contract terms, pipeline quality, add-backs, and the causes of unusually strong recent earnings.

Imagine a business with clean-looking earnings, a reasonable headline multiple, and a broker statement that financing should be available. The initial profile might look promising.

ADE can still show Proceed with caution if recurring revenue is only partly proven, annual reserves are not documented, the seller owns key customer relationships, and the buyer has not identified a dedicated post-close operator. The point is not to kill the deal automatically. The point is to show what must become true before the buyer treats the opportunity as clean.

In the reverse case, a deal can receive a low score or Reject with High confidence when the source materials clearly show weak supportability, severe concentration, or fragile transfer risk. Confidence describes how well ADE can support the conclusion, not how favorable the conclusion is.

ADE's recommendation hierarchy is designed to keep buyers from turning a decent score into unjustified conviction.

ADE's public framing is compatible with a Berkshire-style bias toward durable earnings, understandable businesses, management continuity, downside protection, and disciplined price sensitivity. That comparison is a plain-English analogy, not a claim about any proprietary Berkshire Hathaway process.

The comparison refers to public acquisition criteria, including an SEC-hosted Berkshire Hathaway filing that discusses consistent earning power, management continuity, simple businesses, and a known offering price. See the SEC-hosted Berkshire Hathaway acquisition criteria.

ADE is independently developed and is not affiliated with, endorsed by, or based on any proprietary system belonging to Berkshire Hathaway. The comparison refers only to publicly stated acquisition principles.